Quick Facts

Trinidad and Tobago’s economic freedom score is 64.1, making its economy the 67th freest in the 2015 Index. Its score is 1.4 points higher than last year, with gains in the management of government spending, business freedom, and freedom from corruption outweighing a loss in fiscal freedom. Trinidad and Tobago is ranked 13th out of 29 countries in the South and Central America/Caribbean region, and its score is above the world average.

Trinidad and Tobago has become one of the most prosperous countries in the Caribbean Basin. Endowed with hydrocarbon reserves, the island group has been struggling against slow growth and an uptick in violence in recent years. Despite this year’s gain, economic freedom in Trinidad and Tobago has declined since 2001 by 2.4 points, largely reflecting falling scores in financial freedom, government spending, and fiscal freedom.

Drug-related violence undermines the rule of law, and corruption has infiltrated the police force and increases the daily cost of living. The regulatory environment remains relatively inefficient. The economy is fairly open to trade and investment. The financial system is undergoing modernization in response to the recent financial upheaval and government bailouts.

Background

Trinidad and Tobago is one of the Caribbean’s richest nations, with hydrocarbons accounting for more than 40 percent of GDP and 80 percent of exports. Oil production has declined over the past decade as the country has focused on natural gas, but the government is providing fiscal incentives for investments in onshore and deep-water acreage to boost oil reserves. Prime Minister Kamla Persad-Bissessar has remained popular since her election in 2010 but has had to contend with a surge in drug-related corruption and violent crime. A Heritage and Stabilisation Fund was established in 2007 to provide a countercyclical backstop for government accounts when global energy prices fall. Financial services and construction have been among the strongest non-energy subsectors. Tourism has the potential for significant growth.

Corruption, much of it drug-related, diverts resources and damages the rule of law. Narcotics-related corruption in the police force is endemic. The judicial branch is independent but subject to some political pressure and corruption. Rising rates of crime and very high levels of violent crime have produced long delays in the court system. Property rights are well protected.

Trinidad and Tobago’s top individual and top corporate income tax rates are 25 percent. Other taxes include a value-added tax and a property tax. Tax revenue amounts to about 29.2 percent of the domestic economy. Government spending, supported partly by hydrocarbon revenues, equals approximately 32 percent of domestic production. Public debt equals 31 percent of gross domestic product.

With no minimum capital required, it takes about 12 days to start a company, but licensing requirements remain time-consuming. The relatively flexible labor market facilitates the matching of supply and demand in the labor market. The government’s 2013–2014 budget proposal included large subsidies for natural gas, education, and the environment, but it also reduced the national fuel subsidy.

Trinidad and Tobago’s average tariff rate is 5.7 percent. Cars and many agricultural goods require import licenses. Over 40 companies are 100 percent state-owned. The financial system has regained its stability after strain caused by the collapse of a large financial group. State influence is not substantial, and banking remains relatively well capitalized, with the number of nonperforming loans declining.